GBP/JPY consolidated with a slight bearish bias in May as the pound-yen fell from 173.46 to 169.54 in a choppy manner. In the beginning of June, price rallied and reversed this slight downtrend when GBP/JPY rallied above the moving averages and May’s falling trendline.
Last week, we saw the market come back to 171.00, which tested the broken May trendline as support. Traders bought GBP/JPY off 171 and it surged after BoE gov. Mark Carney said the bank might raise rates earlier than the market was expecting.
The bullish confirmation from 171 puts GBP/JPY strongly in bullish mode. It is about to challenge the 173.46 high, and is also poised to test the 2014-high at 174.83.
If price pushes above 174.85 we should anticipate a strong bullish extension for a new 2014-high. There are a couple of methods we can project the breakout.
1) 2014-range: The 2014-range has been between 163.87 and 174.83, almost 1100 pips. A break above 174.83 could expose another 1100 pip run toward 185.80.
2) A conservative measure could be 50% or 61.8% projection. which is either 550 or almost 680 pips higher, toward the 180.30 – 181.60 range.
At this point, to start the week, if there is a pullback before the 2014-high is reached, the bearish outlook should first be limited to 172. Below 171 however, the outlook will have turned bearish in the short-term, which retains the consolidation, non-directional mode shown by the GBP/JPY in 2014 so far.
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